Planned Gifts: Charitable Trusts

Charitable trusts are an ideal way to convert highly appreciated assets (such as real estate or stocks) into a lifetime income without having to pay capital gains or estate taxes, while at the same time providing a meaningful benefit to a deserving charitable organization like Sharp HealthCare.

In a charitable trust, a contributor transfers appreciated real estate or stocks to a tax-exempt trust. The trust can sell the assets at full market value and then reinvest the proceeds. The donor (and spouse, or anyone else so designated) receives an income for the rest of his or her life and also generates significant tax advantages. Upon the death of the beneficiary(ies), the assets pass to the nonprofit organization.

When appreciated assets are sold outside of a trust, the owner receives less funds to reinvest after capital gains taxes are paid. If those same assets are placed in a charitable trust before selling them, the owner can avoid capital gains taxes, have more money to reinvest and receive an estate tax benefit.

There are two types of charitable trusts, which differ in how income to the donor is calculated:

A charitable remainder annuity trust provides the security of a fixed annual payment.

A charitable remainder unitrust provides a variable income payment based on an annual valuation of the trust's underlying assets. With a well-managed unitrust, assets can build quickly because they grow tax-free, leading to higher income — and a good hedge against inflation as the value of the trust rises.

Through careful planning with qualified advisors, we can help donors determine the charitable trust or other planned giving options that are right for them.

To learn more about charitable trusts and other planned giving opportunities, please contact Norm Timmins at 619-740-4315.